The prospects for economic security under Trump or Harris

Winning the Rust Belt

In the book “Hillbilly Elegy,” Republican vice presidential nominee J.D. Vance vividly portrays the plight of former factory and steelworkers who, having lost their jobs, have been forced to take low-paid service jobs, struggling to make ends meet and without much support from either the federal or state governments.

Despite the presence of major cities like Philadelphia and of people with stable jobs in the Rust Belt, this story captures the grievances of many of its voters. In this region, the margins separating candidates are so tight that a shift of less than 10,000 votes could change the outcome of the entire race, as seen in the previous two election cycles.

In Michigan in 2016, out of a total of 4.5 million voters, a shift of just over 5,000 votes could have changed the result in favor of Hillary Rodham Clinton. Similarly, in Wisconsin in 2020, a shift of 10,000 votes out of 3.2 million voters would have handed Trump a victory in the state over Biden. As a result, the demands of labor unions and former heavy industry workers, who represent a large voting bloc in this part of the country, tend to be disproportionately reflected in campaign promises.

So, what do Harris or Trump need to do to win the Rust Belt? At the least, criticize free trade. There is a strong perception that free trade has not only caused factories to relocate to Mexico and China, where production costs are lower and efficiency is higher, but has led American businesses to shut down because of competition from foreign imports.

As a result, both campaigns are prioritizing national economic interests over free trade and promising to stand up to China’s unfair practices.

The return of ‘tariff man’

However, the Republican and Democratic strategies differ. Trump is reaffirming his administration’s economic policies, particularly a trade regime based on tariffs, including unrealistic promises of a 10% tariff on all imports and 60% tariff on goods from China.

Trump claims that exporters bear the cost of tariffs, however, as many have already pointed out, it is consumers who suffer, as high tariffs lead to inflation — and all the while, Trump criticizes the Biden administration for failing to control inflation. Nonetheless, the Republican campaign — which sees protecting domestic industries and applying economic pressure on other countries to achieve trade surpluses as a “victory” — is unlikely to abandon its policies.

Tariffs are viewed as an offensive and not just a defensive economic tool. Trump has said that they would be used to retaliate against countries that place tariffs or export restrictions on American goods. While there are some cases in which retaliatory tariffs are allowed under the World Trade Organization’s dispute resolution mechanism and anti-dumping measures, Trump says that he would not bother respecting such processes.

Furthermore, the Republican nominee has proposed stripping China of its “most favored nation” status and supporting onshoring (returning production bases to the U.S.) to strengthen supply chains — though it is not clear how this would be achieved.

In the 1980s, political pressure was applied to correct the United States’ trade imbalance with Japan, an ally. However, China is not an American ally and the U.S. lacks similar leverage — hence Trump’s aggressive stance. In general, the Republican campaign’s trade policy is more focused on reducing imports from all countries and cutting the trade deficit than on economic security per se.

Legislating economic security

In the other camp, Harris has had to quickly build an election strategy from scratch, leaving little time to refine her policies. As a result, the policy platform presented at the August Democratic convention, where Harris was nominated, still contained many references to a “Biden second term,” showing that policy is not her campaign’s primary focus. In fact, it seems likely that Harris will generally continue Biden’s work.

After serving as California attorney general, Harris was a senator for less than one term before becoming vice president, and therefore lacks adequate political experience in fields like foreign policy and trade. Also, her voting record as a senator was not very consistent.

However, if she wins, her background as an attorney could be significant when it comes to economic security policy, which in the U.S. is based on several legal mechanisms. These include measures derived from the International Emergency Economic Powers Act, through which the executive branch has the power to regulate economic activities. The government’s strategy is to align the latter with national security by using the law to constrain corporate behavior.

If Harris is elected, legal restrictions could increase, potentially diminishing the U.S. market’s vitality. This scenario could also apply to Trump’s tariff-centered policies, but a legally constrained market could signify the U.S. losing the economic freedom that has historically been a driver of its growth.

Regardless of who wins, American economic security policies are expected to become more protectionist, making corporate activity less fervent. This suggests that the U.S., once a free trade champion, will take a back seat and focus on its economic security.

A lot of uncertainty remains. How will Japan, mired in uncertainty after its own general election, face this changing America? What impact will a more inward-looking U.S. have on the international economic order? Will China adopt a similar economic security strategy in response? Will America’s allies and partners align with its policies?

What is certain is that this election will present Japan’s economy — and the global order — with increasingly challenging questions.

(Photo Credit: Shutterstock)

[Note] This article was posted to the Japan Times on November 5, 2024:
https://www.japantimes.co.jp/commentary/2024/11/05/world/us-economic-security-trump-harris-scenarios/

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